Week in Media: this market is becoming too volatile to predict
Of course this year will see a big rebound in media spend. But predicting an 8% increase next year is fraught with unknowns, writes the editor
Yesterday we were given 27.7 billion reasons to be cheerful, if your level of mirth is directly linked to how much advertising media spend is forecast to be this year.
The latest AA/Warc Expenditure Report figures were upgraded to 18% growth for 2021 (up from a 15% forecast in April) – which would be the biggest rise in 33 years.
While a strong UK recovery is obviously good news, it’s not surprising news. A ball will obviously bounce higher the harder it falls – and higher still if it is slammed on to the ground.
Last year’s pandemic precipitated an almighty crash of about 15%, causing a tsunami of redundancies and furloughs as revenues plummeted. Those still working full-time faced the stresses of home working, home schooling, while many businesses sought to use the pandemic as an opportunity to future proof their business.
The more intriguing prediction by Warc’s latest research is the 7.7% growth it is forecasting in 2022. This is more in line with the 5%-6% growth levels seen in the years leading up to pandemic-hit 2020.
Warc tells us that GDP changes account for about two-thirds of a change in adspend, while its model is adjusted to allow for big advertising events such as the 2022 World Cup.
While that all seems eminently sensible, how much confidence can we have in any forecast given the disruptive elements this industry now faces?
Client service and staffing issues for agencies
There is a new-business bonanza happening this year, as Nick Manning expertly wrote about last month. However, the flavour of this current iteration of “mediapalooza” is that some advertisers are, as Manning describes, “shifting their business models to be more omnichannel”, which some are taking more control of media planning and execution themselves.
We don’t know what impact this will have on next year’s media spend.
Media agencies are also facing a war for hiring talent as the economy recovers, client briefs escalate, and managers to look to rebuild their depleted teams after last year’s downsizing.
This is proving very difficult for one media agency CEO I spoke to recently.
“It’s hard now,” he says. “In January we wanted four digital people and we filled that in about a week with really good people. We’e got seven digital specs out now and you can’t even get interviews now.”
This is happening all over media agencies because, as he says: “our industry shot itself in the foot”.
He explains: “The downtime came and most people went into massive volume redundancy or stick everyone on furlough, which is no good for young, ambitious people. Now, the agencies want them back but they’re no longer loyal.
“Also, our industry didn’t invest in graduate recruitment or training during the pandemic, so there’s no talent coming through. Anyone with two or three year’s experience is worth £50k-£60k which is crazy. You can’t ask clients to cover those costs.”
We don’t know what impact this will have on next year’s media spend.
Selling media isn’t what it used to be
Disruptive forces are likely to continue next year on the sell-side too for media owners. This week saw another parade of US tech giants announce a set of ad revenue figures that in any other sector would seem fantastical: Google (up 69%), Facebook (up 56%), Amazon (up 87%).
An ever-greater percentage of media spend is going on monopoly platforms that could face antitrust action in the US and the EU. Our own UK government, to its credit, is giving the Competition & Markets Authority the power to regulate online platforms with a new Digital Markets Unit and has already announced an online ban for HFSS advertising directed at children. There could be further bans on the way, as ISBA’s former advertising and media director Bob Wootton warned recently.
We don’t know what impact this will have on next year’s media spend.
It’s even become a more volatile business for traditional media, such as TV where advertisers are able to buy later than ever before without penalties after the commercial broadcasters got rid of their longstanding eight-week advanced booking deadlines.
As Tim Greene, head of AV at Spark Foundry, told us yesterday: “The AV market has been extremely volatile…. This, along with the AB flexibility extended by sales houses has encouraged advertisers to hedge their bets for longer, leading to more cash at later points than I can remember seeing in TV.”
This may or may not be great news for the broadcasters. ITV, for example, was understandably proud to talk about its smash hit show Love Island being. a commercial “sell-out”, being brands being asked to pay a reported £100,000 per 30-second spot.
But, as popular as Love Island is, it’s still a regular episodic show and not a “special event” like England’s Euro 2020 semi-final this month, or the one-off Harry and Meghan interview in March. TV broadcasters typically sell audiences to advertisers across channels and shows, not spots on specific shows.
One agency source, whose client advertises on Love Island, laments how late-buying is contributing to “huge inflation” for peak TV programming.
He said: “The shorter the AB times are, the harder it is for ITV to give advertisers airtime quality. There’s already a bunfight over Love Island, and if people are booking late it’s hard for ITV to get the maximum amount of revenue for that programme, which an eight-week deadline allowed them to do. If everyone is buying two weeks out, it’s much easier to keep everyone happy by just setting a flat price of a hundred grand, whether you’re at the start or end of the programme. It could be costing them money overall.”
We don’t know… well, you get the point by now.
While we should be very encouraged by a return in advertiser confidence this year, let’s not start panicking if next year’s growth numbers are nowhere near 7% or 8% just because Warc said so. We’re at a point in commercial media where things never been less predictable.